Keeps 0.6800 with eyes on RBNZ moves


  • NZD/USD picks up bids inside recent trading range between 0.6801-0.6841.
  • RBNZ is expected to keep the interest rate unchanged, FLP in chatters.
  • Vaccine-led market optimism fades amid mixed clues from trade, politics and virus.
  • US holiday can challenge traders post-RBNZ, Governor Adrian Orr’s press conference.

NZD/USD trades positive for the third consecutive day while picking up the bids around 0.6830 during the early Asian session on Wednesday. The pair recently gained bids amid the US dollar pullback. Though, the short-term trading range keeps restricting the kiwi moves ahead of the key event, namely the monetary policy meeting decision by the Reserve Bank of New Zealand (RBNZ).

A new tool to test?

Domestic catalysts, like the ability to tame the coronavirus (COVID-19) at home and mostly positive data, stops the RBNZ from following the RBA’s footsteps, by keeping the benchmark interest rate at 0.25%, for now.  However, the broad COVID-19 resurgence and the Sino-American and the Australia-China tussles can push Governor Adrian Orr and Company to strike bearish statements.

Read: RBNZ Preview: Prepping up for negative interest rates

Although expectedly bearish signals, other than via rate cuts, are on the cards, a new lending tool called Funding for Lending Program (FLP), which offers funds directly to the banks at a rate near the Official Cash Rate (OCR), is in the spotlight. Relating to the same, Analysts at the Australia and New Zealand Banking Group (ANZ) said, “We think the scheme could be $30-50bn in size, while the LSAP is expected to remain unchanged at $100 billion today.”

It’s worth mentioning that global markets shed Monday’s optimism, led by the hopes of the coronavirus (COVID-19) vaccine, yesterday. The sober mood joined downbeat inflation data from China, in contrast to the upbeat Electronic Card Retail Sales figures for October, to confuse the NZD/USD traders.

Also in the line were a stop in the Chinese vaccine’s trial in Brazil due to the death of a volunteer and US President Donald Trump’s efforts to tame the election results. Further to join the league was the American sanctions on Chinese diplomats over the Hong Kong issue and European tariffs on the US goods.

Against this backdrop, Wall Street closed Tuesday’s trading on mixed footing while the US 10-year Treasury yields stayed near the levels marked a day before, around 0.92%.

Moving on, risk catalysts can join the RBNZ-led action to keep the Asian session active while the quote may portray sideways momentum afterward as the US markets are off due to Veterans Day.

Technical analysis

Sustained trading beyond 0.6800 favor NZD/USD bulls to target February 2019 top surrounding 0.6900 before highlighting the 0.6940/45 region, comprising the year 2019 peak, for the buyers.

 



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